Lord Boyd-Carpenter: My Lords, before my noble friend leaves the equalisation of pension ages, will he consider answering the question that I put to him during my speech? Given that the whole operation takes 25 years, I asked if there was any understanding with the Opposition that, if they came into power, they would let it continue in that way.

Lord Mackay of Ardbrecknish: My Lords, I cannot honestly say to my noble friend that there is an understanding, but, as I mentioned, I referred to the Commission for Social Justice. It will be interesting to find out in Committee where the Opposition stand.

I turn to the first part of the Bill, which concerns personal pensions and occupational pensions and, if you like, deals with the post-Maxwell situation. The noble Baroness, Lady Dean of Thornton-le-Fylde, perhaps more than anyone else, covered the traumatic events that had occurred to many people as a result of the activities of the late Robert Maxwell. I never met him, though I was given one opportunity by his sycophants to meet the great man. That was the sole opportunity I had to receive the greatest flash of wisdom I had ever received in my life! However, I decided it would stand me in far better stead if I declined the invitation to press the flesh, keeping one hand firmly over my money, I suspect. I have two friends whose views of Mr. Maxwell resulted in their receiving writs for some half a million pounds to try to stop them disclosing those views. What they said could not even have been described as disclosing 1 per cent. of what they could have said in truth.

However, we cannot of course consider one part of this Bill and say, "That would have helped in the Maxwell situation". One must look at the whole Bill and at all the various steps in the Bill: the trustees, the role of the actuaries and the auditors, OPRA, the compensation fund and the minimum solvency requirement. We must consider all those matters together. But, undoubtedly, if the employer is solvent he will be required to keep the scheme fully funded. My understanding is that that is what is happening in the MGN scheme, which is being refinanced by the employer. Where a scheme winds up in deficit, the debt is still on the employer, but only if he is insolvent does

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the need for compensation arise. However, that compensation must be based on fraud, theft or misappropriation only. I shall leave it at that.

A number of speakers referred to the figure of one-third of trustees on the board and suggested that they might prefer a figure of 50 per cent. I think we have the right balance but clearly we shall have to have a debate on that. One of my noble friends behind me underlined my next point. I too wish to emphasise it. There is a duty on all the trustees to look after the funds. They are not just there to look after their own interests, so to speak, or the interests of the group from whom they are drawn. They are there to look after all the funds.

My noble friend Lord Buckinghamshire made a number of interesting points. We shall look forward to hearing his comments in Committee. He referred to trustees. He was concerned that they should not have unfettered power to set a schedule of contributions in default of agreement. I must tell my noble friend that that is not the intention. We do not wish to put employers in a position where they can be forced to fund their schemes above the statutory minimum solvency level, although of course we hope and believe that many sponsoring employers will wish to do that. There was concern about the "whistle blowing", if I may use that expression as a form of shorthand. My noble friend Lord Dean of Harptree and others asked whether it was only the actuaries and auditors who could blow the whistle. The answer to that is "no"; anyone involved in a pension fund can blow the whistle. The difference is that actuaries and auditors have a duty imposed on them to blow the whistle. That, of course, is an important duty placed on those people who I imagine are closest to the scene of the action in most pension funds.

As regards minimum solvency requirement, I have no doubt that we will have an interesting debate on that. I noted without surprise that there was some suggestion that we might not have the name quite right. However, our concern has been to devise a consistent basis for valuing scheme liabilities as a measure of the adequacy of pension funds to meet their liabilities, and as a basis for assessing matters such as minimum contributions. In considering what should be the appropriate valuation basis, we have borne in mind the need to define an appropriate level of security for members' pensions, and for an entitlement, without actually imposing unnecessarily high costs on employers, which might have led to a significant reduction in the level of occupational pension provision. We must always remember that, if we want to encourage occupational pensions and to encourage employers to have them, we must not make the rules governing them so difficult that employers are frightened to become involved in them.

Following the detailed analysis we made of that subject, and the consultations which we had, my right honourable friend Peter Lilley announced details of our conclusions on 8th December. I am pleased to say that they have not been criticised by the pensions board of the Institute of Actuaries or indeed by the Faculty of Actuaries. Some noble Lords asked me about the valuation method for the minimum solvency. I accept that the method of valuing liabilities and assets is of central importance. However, given that this is a new

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area of statutory involvement, it is important that we have flexibility to respond rapidly to any practical difficulties or changing economic circumstances. We therefore propose that details of the actuarial valuation methods should be set out in a mixture of secondary legislation and professional guidance. We shall of course consult on how that should be brought about.

I was asked questions about the powers and duties of OPRA. Some noble Lords felt that they were not defined in the Bill. I must say that they are there. Each obligation placed on a scheme carries a power for OPRA to enforce it and the Bill sets out in full OPRA's structures, powers and the sanctions available to it. Allied to that, there were concerns that OPRA would not be independent or effective. I must tell the House that OPRA will be a statutory regulator appointed by the Secretary of State and accountable to Parliament. That is not self-regulation. The levy will be set by the Secretary of State and not by the schemes or the employers. We are committed to ensuring that OPRA is properly resourced in order to be fully effective, to be able to recruit staff directly and to be able to respond to the demands placed upon it.

I would say to those noble Lords who raised the following matter that most of the functions of the Occupational Pension Board will transfer to the Department of Social Security and not to OPRA. Therefore it is not logical to say that because the Government fund the OPB they should continue to fund OPRA. It seems to me that there are many taxpayers who are not members of occupational schemes. To ask them, through their taxes, to pay for OPRA, is not right. I think it is right that the pensions system itself ought to pay for OPRA.

The noble Baroness, Lady Turner, in her closing remarks asked me whether there would be representatives of employers and employees on the board. The Bill requires two of the members to be appointed after consultation with employer and employee associations. A number of noble Lords, including the noble Lord, Lord Marsh, and the noble Baroness, Lady Dean, asked me about custodians. We accepted the PLRC recommendation that it would not be appropriate to require pension schemes to use independent custodians. The use of an independent custodian is no guarantee against wrong-doing. There is a danger that a statutory obligation to place assets with them may give the semblance of protection without the reality. I understand that Mr. Maxwell's assets were with a custodian but he was still able to get at them. I believe that to be the case. For many schemes, especially the smaller ones, that might be inappropriate, but of course we shall have a discussion about that. Your Lordships will be happy to hear that I certainly do not have a totally closed mind on that matter and I will listen to the arguments that are put forward. However,

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for the moment we think that it is an unnecessary restriction for us to impose on all schemes, although many of them follow that procedure.

My noble friend Lord Buckinghamshire asked me about the level of compensation for money purchase schemes. He suggested it was more generous than for salary related schemes and he asked why we tilt the playing field. We have reconsidered the level of compensation payable to money purchase schemes in the light of comments we have received since the White Paper was issued. So as to bring them more into line with salary related schemes, money purchase schemes will receive the lower of 90 per cent. of the loss or the amount required to restore a scheme's assets to 90 per cent. of cash equivalents. Our intention is to make provision for this in regulations. For salary related schemes, the level of compensation paid will be the lower of 90 per cent. of the missing assets or the amount required to restore a scheme to a funding level of 90 per cent. based on the minimum solvency requirement. If 90 per cent. of the loss were to be met in all cases this would result in well-funded schemes potentially being restored to a position of surplus through less well-funded schemes paying the levy.

I have taken up enough time, and we shall return to most of the issues. I shall conclude by moving on from the last point that I made. A number of noble Lords opposite seem to feel that the Government favour one form of pension provision over another. That is not the case. We are firmly in favour of funded pension provision. We have no intention of encouraging one form of scheme over another. We recognise that different schemes suit different people and the different circumstances in which people spend their working lives. Employers have to be free to decide what form of scheme to set up while employees must be free to decide whether or not to join that scheme. For all those people who do not have an opportunity to join an occupational pension scheme it would not be right to take away their right to have appropriate personal pension schemes. We believe that those provide a valuable option for many people. There is no intention of tilting the field.

What is requiredas everybody said, it is a complicated issueis that people take the matter seriously and take advice. Due to my involvement in the Bill, at Christmas time I summoned my three children separately before me and asked them whether they had made pension arrangements for themselves and their spouses. They were more interested in whether I had made pension arrangements for myself.

This is an important issue. I believe that what we propose in the Bill will improve the position on occupational pensions and will make sure that our state pension is affordable into the next century. I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.